Recapping the Latest Blue Belt Tech. Non-Compete Dispute (This Time vs. Stryker)

Pittsburgh-based Blue Belt Technologies, an emerging player in the medical device and medical technology industry, continues to find itself at the center of non-compete disputes.   Earlier this year, Blue Belt clashed with MAKO Surgical, a rival in the surgical robotics industry, after Blue Belt hired former MAKO sales executive Jeffrey Gellman.  This time, Blue Belt, Stryker and a former Stryker employee are in the mix.  Last week, a federal court in Michigan granted a preliminary injunction barring Blue Belt and the former Stryker employee, James Bruty, from using Stryker’s confidential information and from soliciting any Stryker customers or employees.  The news is not unexpected, as the court had previously entered a temporary restraining order with the same terms.  The case, however, raises a number of interesting issues and is worth another look.

In 2004 Bruty joined Stryker, one of the world’s leading medical technology companies, as a sales representative in the Stryker’s imaging business unit.  Over the next few years, Bruty was promoted multiple times.  He became a regional sales manager and then, in 2008, joined Stryker Navigation as the Senior Director of Marketing.  During his time at Stryker, Bruty signed a non-compete agreement that contained various non-compete, non-solicitation and confidentiality restrictions.  On December 28, 2012, Bruty informed Stryker that he would be leaving the company to work with a start-up company outside of the industry.  In reality, Bruty had been in talks with Blue Belt since early December.  On January 18, 2013, he left Stryker.  On January 28, he began working for Blue Belt as the company’s Vice-President of Sales and Marketing.  After several attempts to resolve the matter out of court, Stryker filed a lawsuit on March 18, naming both Bruty and Blue Belt as defendants.  On March 19, the court granted a temporary restraining order requiring Bruty to return any corporate documents or files and barring him from soliciting Stryker’s customers or employees.  After expedited discovery, the parties returned to court on May 6 for a hearing on Stryker’s motion for a preliminary injunction.   In the end, the court just converted the terms of the TRO to a preliminary injunction.

First, the court held that Stryker was likely to prevail on the merits of its claim that Bruty had breached his non-compete agreement.   That agreement was actually pretty reasonable.  Under the terms of the agreement, Bruty was only prevented from working for a competitor that sold or developed products that Bruty had worked with or gained knowledge about while working at Stryker.   This type of restriction is significantly narrower than the typical “any competitor whatsoever” restriction that many companies utilize in their non-compete agreements.   That makes sense given the circumstances.  Stryker is a huge company with numerous different divisions.  A non-compete agreement that was drafted to prevent former Stryker employees from working for any competitor whatsoever would likely be overbroad.  So, instead, Stryker utilized an agreement drafted to prevent an employee from working in a particular field with Stryker and then going to work for a competitor in that same field.   This more narrowly tailored sort of restriction is much more reasonable.   Beyond the issue of job function or scope, the term of the non-compete agreement was limited to one year.   On its face, this seems like a relatively reasonable non-compete agreement.

A number of key factors played into the court’s analysis of the strength of Stryker’s case.    As often happens in non-compete and trade secret cases, actual misappropriation played a big role in the outcome.  Apparently, on Bruty’s last day of work at Stryker, he went on his corporate laptop and downloaded the entire contents of the “My Documents” folder to an external hard drive.   He then deleted the My Documents folder from his laptop and emptied the “Recycle Bin” in an apparent attempt to cover his tracks.  According to Stryker’s papers, the items Bruty downloaded included customer lists, strategic plans, product development plans, and research & development materials related to emerging technologies.  It’s pretty hard to spin this and paint Bruty’s conduct in a positive light.  If the allegations are true, he stole a bunch of Stryker’s files.  It’s that simple.  And in a case like this, that’s a tough fact to overcome.

Bruty and Blue Belt attempted to make the case that Stryker and Blue Belt were not actually competitors, so there was no violation of the non-compete agreement.  The court rejected this argument out of hand.  Blue Belt and Stryker both sell knee replacement products and technologies.   Blue Belt is heavily involved in the robotics side of the business.  As it turns out, Stryker is presently developing a robotics product for partial knee replacements.   Then there is the fact that Stryker and Blue Belt both classify each other as competitors in their own internal strategic materials.

And that was pretty much it.  In short, Bruty had stolen company files and gone to work for a competitor in a similar position in violation of a fairly reasonable non-compete agreement.  It’s easy to see how Stryker prevailed in this one.   That said, I have some problems with the court’s ruling.  As written, the temporary restraining order, and now preliminary injunction, contains the following provisions:

Bruty and all parties in active concert or participation with him who receive actual notice of this Order by personal service or otherwise are temporarily enjoined from contacting, soliciting, or moving the business of any current or prospective customer of Stryker Navigation with whom Bruty had contact or about whom Bruty learned confidential information during the last twenty-four (24) months of his employment with Stryker, for purposes of Navigation Products;

Bruty, Blue Belt and all parties in active concert or participation with them who receive actual notice of this Order by personal service or otherwise are temporarily enjoined from contacting, soliciting, inducing or influencing, or attempting to solicit, induce or influence, any person engaged as an employee, independent contractor or agent of Stryker to terminate his, her, or its employment and/or business relationship with Stryker or do any act which may result in the impairment of the relationship between Stryker and its employees, independent contractors, or agents;

This is troubling for a few reasons.  First, under the order, Blue Belt is clearly prohibited from soliciting any Stryker employees.   This is unreasonable.  Blue Belt and Stryker should be able to compete for the best talent.  Blue Belt should have every right to try to steal top talent from Stryker.   Instead, the court’s ruling basically insulates Stryker from competition for talent from an up-and-coming player in the industry.  This ruling is clearly predicated on the court’s belief that it would be unfair for Blue Belt to poach Stryker employees.  That belief is built on a number of unjustifiable assumptions.  Most significantly, this assumes that every Stryker employee must have been exposed to confidential information to such an extent that they could not fairly, under any circumstances, go work for Blue Belt.  This also assumes inevitable disclosure.  That’s a stretch.  In my view, the court went too far in enjoining Blue Belt from trying to hire other Stryker employees (i.e. competing for the best talent in the market).

The order also appears to prevent Blue Belt, not just Bruty, from soliciting Stryker customers and prospective customers who Bruty had any contact with while at Stryker.   Again, I reject the premise.  I have been involved in numerous non-compete disputes in the world of medical device sales.   Simply put, you are not dealing with the type of customer relationships that non-compete agreements can legitimately be used to protect.   In most states, non-compete agreements can be used to protect substantial or exclusive customer relationships.  The types of relationships at issue in the medical device market are not substantial or exclusive.  Everyone in the industry knows everyone else.  The customers are places like hospitals, surgeons, and sports medicine clinics.  The customers are well-known.  The customers do business with a variety of manufacturers or distributors.  The market is competitive.  A hospital, for instance, will routinely entertain proposals from a variety of distributors.  It is not uncommon for a hospital to tell one distributor what another distributor is offering, in hopes of getting a better deal.   Bottom line:  These are not special customer relationships that should be protected.   Nonetheless, the preliminary injunction appears to prohibit anyone at Blue Belt from soliciting any doctors or surgeons Bruty called on while at Stryker—- Even though a sales rep could just find their name in a directory and cold call them.

Obviously, I can accept the court ordering Bruty to return any company materials he stole and enjoining him against future disclosure of Stryker’s confidential information.  I can even accept the court preventing Bruty from soliciting his old customers or current Stryker employees.  But the court’s order goes far beyond that and, in my view, shields Stryker from legitimate competition.  And Stryker does not need the extra help. The case is Stryker Corp. v. Bruty, 2013 WL 1962391 (W.D. Mich. May 10, 2013).

Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida.  He focuses his practice on cases involving non-compete disputes and represents clients in Florida and throughout the country.